IMF researchers respond to the GDP of planet doubt..

Prof. Peter A.G. van Bergeijk of Erasmus University raised the issue earlier. He said the Planet GDP aggregate differed when looked from different sources.

IMF researchers responded to the issue here. They say choice of numeraire matters. As most GDP is accounted in terms of USD. As USD has appreciated this year, these issues have cropped up:

IMF data showed that the dollar value of ‘planetary GDP’ fell in 2015, but the IMF projects that world real GDP growth and inflation will be positive. This column notes that there is no inconsistency here. The decline in the dollar value of ‘planetary GDP’ reflects the 2015 increase in the value of the US dollar, not calculation errors or inconsistencies between real growth, inflation, and nominal GDP projections. The choice of numeraire matters in measuring nominal GDP growth, especially in years with very large currency movements such as the ones we have seen this year.

As a result of this US dollar appreciation, the US dollar value of GDP has fallen sharply across the world, even in countries where GDP has grown at a hefty pace in domestic currency terms. If the currency of a country weakens against the US dollar, the dollar value of that country’s GDP will decline mechanically. Table 1 below provides a numerical illustration of this for a selected number of countries. For instance, the table documents that Eurozone GDP dropped 14% in US dollar terms but rose 2.7% in euro terms, with even more dramatic differences between domestic-currency and dollar GDP for Brazil and Russia.